What is Loan Insurance?
Loan insurance is an insurance policy that serves to protect both the financial institution, in the event of insolvency, and the holder of the loan, in the event of events that prevent the repayment of the current loan.
In the event of taking out insurance on the loan, the amount is not paid in a single solution but is aggregated and spread over each monthly installment of the loan or the assignment of the fifth. Lenders rarely require advance payment of the loan insurance policy.
Advantages of loan insurance
The insurance policy on the loan intervenes if the holder of the loan or the assignment of the fifth is unable to pay the monthly installments for the following reasons:
- Job loss. It intervenes if the employees have lost their jobs and are unable to pay for at least two consecutive months;
- Temporary incapacity for work for a maximum of one year;
- Total and permanent disability;
- Serious economic difficulties;
If one of these causes occurs, all documentation ascertaining the situation must be produced.
When is the insurance policy mandatory?
Loan insurance is mandatory only to take out a transfer of the fifth , both of the pension and of the salary. In particular, it is mandatory by law to take out a life insurance policy for the transfer of the fifth of the pension and a life and work risk policy for the transfer of the fifth of the salary. By doing so, you are also covered in case of job loss due to the bankruptcy of the company you work for.
When any other type of financing is requested, it is not necessary to take out an insurance policy. In some cases, however, the lender may request it because, for example, the applicant’s income is not sufficient to guarantee the repayment of the loan, therefore it becomes necessary in order to obtain the financing.
When is the insurance policy recommended?
Loan insurance should be taken out when high and over $ 5,000 is requested.